The Empirical Study of Performance of Chinese Small and. Medium Enterprises Financing Condition

Transcription

1 The Empirical Study of Performance of Chinese Small and Medium Enterprises Financing Condition Ling Zhi-yong 1, 2 yan qiangxiang 1 (1 Zhuzhou Institute of Technology,Zhuzhou412008,Chian 2 School of Business, Central South University,Changsha410083,China) Abstract: By virtue of a demonstration, the author of the article brings into comparison the financing conditions of both SMEs and large enterprises in China, arguing that the former face with institutional restrictions in financing. What inferred is a close relation between a financing shortage in SMEs and the relevant institutions in practice. And the minor enterprises desire for reforms in indirect financing institutions is revealed. Key Words: SMEs, indirect financing and institutional reforms A research on insufficient financing of SMEs should be commenced with a survey of instances that can give proof of its existence, which was once overlooked, though, owing to the immaturity of fundamental theories of economy at home and a lack of data before. The very purpose of the article is to study the SMEs to make clear whether they have encountered a factual shortage of fund and there is a cry for reformation in indirect financing institutions. Some significant conclusions are expected in the detailed analysis of instances on the financing status of enterprises of various scales. 1. Description of the method If financing trouble face SMES alone, we can just bring into comparison some large companies to verify the small ones problems. Thus we first consider financing status of large companies, then that of small ones in contrast, provided that the financing status of the former is an outcome of rationality. Before lending money to enterprises, a bank will always examine their profit ability and liability, which could be expressed in a function indicating its preference to provide the loans. So we picked up a series of indicators that reflect the enterprises profit margins and risk prospects from their financial data. Then the figures of the enterprises newly added loans were analyzed in terms of these indicators to find what factors the bank would concern about in its decision-making. Provided the bank s consideration is rather rational, the data from SMEs would then be focused on and placed into the regression equations deduced from the analysis of large companies, getting the SMEs theoretical loans, which is still to be compared with the real figures. SMEs must have not suffered insufficiency of financing if the hypothesis derived from such a comparison hold water, i.e. the theoretical loans are fewer than or equal to the real figures. Here we chose the following indicators to show a large enterprise s profit margins and risk status: net profit/ gross assets X 1, liability X 2, current ratio X 3, bank loan balance/ gross assets

2 X 4, and large enterprises newly added loans in the current (A), getting a regression equation A= α + α + α + α, which reflects the influence of these indicators on bank s 1X 1 2X 2 3X 3 4X 4 behavior. Provided that the equation proves the bank s decision is rather rational, we may further put the other figures into the regression equation net profit of SMEs/ gross Y 1, liability Y 2, current ratio Y 3, bank loan/ gross Y 4, aiming at drawing a comparison between the SMEs newly-added loan in theory the current B, and the real figure B. The institutional restrictions on SMEs financing would be inexplicable only if the hypothesis B B stands up. Relevant data from large enterprises were also taken as the basis of analysis to ascertain the bank s evaluation. Thus we can prove the problem of financing shortage does exists in SMEs if the bank makes different evaluations for the same risks of small and large enterprises. Otherwise the answer would be negative. In this way the empirical study can prove the insufficiency of financing in SMEs no matter what factors it arises from companies intrinsic factors or their over-demands for bank loans. 2. Data Description Such a empirical analysis requires specific financial data from both large and small enterprises, though the related statistics is not adequate yet. To have an easier access to the data, 30 public list companies have been chosen at random as our data source of large enterprises. Those enterprises financial data from 1993 to 2003 were substituted by their total average figures for it is self-evident that all these public companies are large scaled. Among the chosen financial indicators are gross, owner s rights and interests, short-term loan, long-term loan, net profit, liability and current ratio. As to the 30 corporations coming into stock market before 1993, please refer to table 2.1, from which one can see the PT(Particular Transfer) firms were excluded for a shortage of data after Particular Transfer. To guarantee consistency of the analysis, we also took out some other firms as Shen Huake, Shen Estate Management, Shahe Stock and Shen Konka, which are short of borrowing records in Then the 23 remained were listed in table 2.2. Total average short-term loan, long-term loan, net profit, liability and current ratio in the given time were shown in table 2.4. The amount of short & long-term bank loan the last was subtracted from the figure in the current to indicate the bank preference to loan money, which can also be shown in terms of profit margin and risk status of the enterprise. Here profit can be expressed in proportion of net profit to gross and risk status shown in liability and current ratio. For the possibility of bank s regaining its loan will keep pace with the increased proportion of newly added loan to gross. The result of the calculation is in table 2.5.

3 table2.1 table2.2 code Short name code Short name Shen code Short name code Short name 万科 A 深华发 A Development Shen KonkaA 北大高科 深科技 A ST Zhonghua *ST 星源 深赤湾 A Wan Ke A PT Jin TianA High-tech A Shen ZhongguanA Shen Shenbao 深振业 A 深天地 A 深达声 A 招商局 A *ST 亿安 ST 特力 A 深宝安 A 飞亚达 A Peking Univ A 南玻科控 深能源 A *ST 星源 深华发 A 深振业 A 深科技 A 深达声 A 深赤湾 A *ST 亿安 深天地 A *ST 石化 A 一致药业 ST 中华 A 深深房 A 深中冠 A *ST 盛润 A 深深宝 A 深宝安 A 招商局 A 深华新 ST 特力 A ST 深物业 飞亚达 A 南玻科控 深能源 A *ST 石化 A 一致药业 沙河股份 深深房 A PT 中浩 *ST 盛润 A table2.4 data collection of stock companies in net current short-term loan long-term loan liability profit ratio

4 table2.5 data collection of stock companies2 Newly added loan/average the last Capital Net profit/gross Accumulated current liability rate loan/gross ratio (0.02) (0.02) (0.00) (0.07) Data Analysis Newly increased loan/ last s average assets being dependent variable and last s assets liability, net profit/ gross assets accumulated total loan/ gross assets and flowing rate being independent variable, a regressive analysis was made since indicators in history are usually adopted by the banks in analyzing enterprises risk status. The gradual regression gets a= c, in which a is newly added loan/ gross, c is net profit/ gross, F=8.65,Pr>F= and one can see a striking regression here. What indicated here is the bank s oversimplified consideration of the enterprises profit margins and its ignorance of the risk status of them. Conclusion 1: the banks fail to take into account the enterprises risk status, and the liability and current ratio exert no influence on the banks decision about providing loans. Conclusion 2: table 2.5 shows that a remarkable change in the relations between banks loaning money and liability after 1996, which made the influence of liability on provision of loans become indistinctive. Footnote 2. Realizing their towering Non-performance Loans, banks became more careful of it and started credit tightening since 1996, and even more rigid loan calling-in measures during Zhu Rong-ji s term in office took every bank loaners under control. In this sense banks are policy-oriented managers rather than independent parties. The above calculation proves banks are willing to provide loans to large enterprises when: Current s newly-added loan/ last s gross = 1.36 last s net profit/ last s gross In a discussion about financial condition of the SMES, large companies were brought into comparison to help judge whether the former is suffering discrimination from the banks. What we obtained from the regression equation once used on large enterprises is the amount of loan the fairly treated SMEs could expect of banks, when it was input their net profit last / gross last. Otherwise the output of the equation may still exceed the SMEs real newly added loan, when they do face discrimination from banks.

5 The following is a comparison between the data of township enterprises and that of large companies. For most of township enterprises are small and medium scaled. With regard to financing issues we may even prove it workable to replace the SMEs by township enterprises in contrast with large-scaled ones. (It can be referred to another paper in plan) Data of township enterprises are shown in table 2.6, which can be further dealt as in table 2.7. table2.6 table2.7 Short-term loan Long-term loan Gross profit Added loan/gross last Net profit/gross The proportion of the enterprises net profit to gross was put into the above regression equation to get the ideal value of newly added loan/ gross the last as shown in table 2.8. table2.8 data collection of township enterprises: Newly-added loan/gross Net profit/gross Newly-added loan/ideal value of the last gross the last 图 2.1 In table2.7 and 2.8, one can see that the ideal value greatly exceeds the real one. Obviously banks treat various-scaled enterprises differently, that is to say, SMEs are suffering discrimination. Now a t is used to validate this group of data.

6 理想值与实际值的对比 年度 新增贷款 / 上年度总资产新增贷款 / 上年度总资产理想值 The original hypothesis we once established is that: the real value exceeds the ideal of newly increased loan/ gross last. But the result is: Pr > t=0.0016<0.05, that is, it happened an incident of little probability. Therefore we reject the hypothesis and reach an opposite conclusion. Hypothesis Test Null hypothesis: Mean 1 - Mean 2 <= 0 Alternative: Mean 1 - Mean 2 > 0 If Variances Are t statistic Df Pr > t Equal Not Equal There is still room for improvement of the method: firstly there is no proof that banks providing loans to large enterprises is rational. In other words, the large enterprises never suffer a shortage of financing nor feel necessary to apply for more loans. The reason why we assume the banks behavior is rational just is we are not able to exclude the possible rationality of banks lending loans to large enterprises. Such being the case, we can only adopt the principle of statistics as to either accept or exclude it. Secondly, owing to a shortage of time from the beginning of national annual compiling and modern accounting, we find only limited data in our regressive analysis and t test. The hardships we underwent in data obtaining forced us to replace the data of large enterprises with that of some public list companies, and only pick up the data of village and township enterprises from the of 1995 in contrast with the former. But a tendency still can be caught in the far-fetched regressive analysis and t test. Finally, the special identity of the township enterprises should also be taken into account in the analysis in respect of the influence of the government s policies the small village and township enterprises may face with financing restrictions that the state-owned ones do not. We find it yet hard to further our analysis on this issue on the basis of the existing data. 4. A Brief Summary

7 What we see from the above analysis is the banks discrimination against SMES. Since the banks providing loans to large enterprises is rational, we find it safe to say that there is insufficiency of financing in SMEs. Meanwhile such a shortage of financing was found considerably related to the institutional arrangement and structures the SMEs have to face with. That is why the enterprises would expect some potential benefits of the future reforms in financial institutions, which accounts for so-called institutional non- equilibrium in economy. Thus from the small enterprises point of view, insufficiency of financing arouses their enormous demands for institutional reformation References [1] Zhiyong Ling,,Zhifeng Liang, The study of institutional evolution and performance of Chinese SMEs finance